Despite recent talk of property down
turn, WestpacTrust Investment Management recently found New Zealanders had made good call by favouring residential property as an investment.
Its survey of different investment types over the past nine years found that managed funds (weighted towards equities) had only showed better returns than housing in the previous nine months.
WestpacTrust Investment chief investment officer David Beattie says over the nine year period residential property investors also suffered less volatility in wealth than other investment types.
The result would seem to vindicate the often questioned rationality of New Zealand households holding higher exposures in housing assets than their global counterparts, he says.
Housing assets still come out ahead, despite the fact that shares significantly outperform residential property in gross returns.
“This often-reported finding tends to be used to encourage households to hold better balance between housing assets and managed funds.”
Beattie says by factoring in the tax-free capital gains on housing and the long-term advantage of leverage provided by mortgages, residential property has provided better returns.
Another survey released by the ASB Bank confirms residential property remains the preferred investment for most New Zealanders. This confidence survey showed that 21 percent of respondents voted residential property as the most likely to give the best return.
The result was three percent up on the last quarter and marked the highest level of support any investment type had achieved in the two year history of the survey.
The results are in contrast to recent property market data showing low turn-over and fall in values, although much of this can be attributed to the market stalling at the time of the election, the survey stated.
Descent into autumn?
Is there slight, but nevertheless niggling sign that the end of the golden summer is nigh for property?
Given the new economy rolling upon us, new economy built around the Internet and e-commerce, should investors be widening their interests and looking at what the equity markets are offering?
While for many, paying off the mortgage or buying second house, doing it up and renting it out, may have been the ideal investment, it’s time to move on, says financial adviser Brent Wheeler.
“Property investment has been attractive to New Zealanders for tax and inflation reasons, but most of all, it’s something most New Zealanders feel comfortable with — after all, it’s the DIY thing that’s worked for New Zealand.”
He believes the days of investing in property like this are over.
It’s time to look at other forms of investment. There are other forms offering many of the advantages of much favoured property, he says.
Venture capital is one area that allows people to capitalise on the popular new technology industries. This area is now being picked up by institutional investors looking to widen their own portfolio.
There are few vehicles for venture capital investing, he says.
“There’s the private informal market, which is funded from friends and family. For instance someone who has good idea goes informally to friends and family for funding.
“This has always been significant market to get money that’s worked for New Zealanders.”
But the recent arrival into this market, of the institutions has really put venture capital on the front bench. With 54-55 percent of the stock market held by institutional investors, they have major influence.
“Institutions like AMP and AXA are looking to diversify their portfolios and looking at venture capital, so anyone can invest in venture capital through one of these institutional products.
Venture capital offers people the chance to capture some of the benefits of the new technology industries.
“There are those companies like Caltech, that are dedicated to venture capital, and others like Jenny Morrell who also invest in venture capital opportunities.
“They’re what I call dedicated venture capital funds, whereas AMP venture capital will be part of the overall portfolio.”
So you want to get into the sharemarket but don’t know what to pick
Now through the wonders of online simulation you can build your own share portfolio and test your picks against the market — and it won’t cost you cent.
Last year Wilson & Horton launched its New Zealand Herald online site called “Stockwatch” (stockwatch.co.nz) which lets you have play with shares — but without spending any money.
Charts and market information on the site give you full financial histories and up to date movements and prices of all the companies listed on the NZ stock exchange.
You can add or subtract shares from your portfolio when you feel like it.
“It’s so simple that lot of companies are using this site to train their people how to use the stock market. And of course, it’s free,” says Wilson & Horton Interactive business development manager Chantal Dunbar.
The site also has e-alert, feature that you can program in to keep you up to date with company movements.
Dunbar adds that eventually e-alerts could happen through cellphones.
From the beginning of March, Quicktrade — the facility to purchase shares online — has been added to the site.
“We have agreement in place with Direct Broking who fulfil all trades for us. So all we are is gateway to that service, we provide the online component of that and the actual fulfilment of the trade is conducted by Direct. All we do is facilitate trade, educate the market, help grow the market.
“Security is paramount for us so it’s taken while to put into place. We’re very aware that the NZ Herald is our brand, and our biggest challenge is to ensure that any transaction won’t put us in jeopardy of any NZSE regulations. We’ve gone to lot of trouble to be sure we can give people the assurances they need to communicate online and be sure that they’re not giving their money to any old website.”
Dunbar says the next step is to add Australian market information to the site.
This will allow people to compare their portfolio in New Zealand dollars and Australian dollars, all in real time.
So will this facility help drive people into online trading?
“What I’d like to see is it helping people understand how they can get involved in trading — whether it’s online or offline.
“People will always have their individual comfort levels whether it’s real person to talk to or whether they’re happy doing it online. It’s totally up to the individual.
“But we want to grow that market and ensure that people first of all educate themselves, then they can chose to trade online.
“Do it with ourselves or someone else, it’s totally up to them. They might have relationship with broker, they might extend that relationship with that broker through to online trading… after they’ve learnt how to watch the market with Stockwatch.”